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“Putting Poverty to Poverty

Museums by 2050”

Submitted To- Submitted By-

“Manisha Ma’am” Prem Kumar Pankaj B.Com(H), Section A

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Roll No. - 31122810

PrefaceThis project talks about a very uncommon and popular banking system prevalent in Bangladesh. The concept of this banking system is based upon “microcredit” or “micro-financing”. Grameen bank that initially started as a project of Bangladesh Bank later got transformed into a new bank itself.

Grameen Bank (GB) has reversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, accountability, participation and creativity. GB provides credit to the poorest of the poor in rural Bangladesh, without any collateral. At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in the overall development of socio-economic conditions of the poor who have been kept outside the banking orbit on the ground that they are poor and hence not bankable. Professor Muhammad Yunus, the founder of "Grameen Bank" and its Managing Director, reasoned that if financial resources can be made available to the poor people on terms and conditions that are appropriate and reasonable, "these millions of small people with their millions of small pursuits can add up to create the biggest development wonder."

Grameen Bank's positive impact on its poor and formerly poor borrowers has been documented in many independent studies carried out by external agencies including the World Bank, the International Food Research Policy Institute (IFPRI) and the Bangladesh Institute of Development Studies (BIDS).

This project on Grameen Bank is an effort to bring forth this creative banking system that has helped shape millions of lives of people in Bangladesh and abroad. This report has been made after 3 weeks of proper research and in-depth study about the functioning of Grameen Bank over an internship with Grameen Bank, Dhaka, Bangladesh from 7th December, 2013 to 28th December, 2013. I hope my efforts to compile this report was worth reading.

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IntroductionThe Grameen Bank (Bengali: গ্রামীণ বাংক) is a Nobel Peace Prize winning microfinance organization and community development bank founded in Bangladesh. It makes small loans (known as microcredit or "grameencredit") to the impoverished without requiring collateral. The name Grameen is derived from the word gram which means "rural" or "village" in the Bengali language.

Micro-credit loans are based on the concept that the poor have skills that are under-utilized and, with incentive, they can earn more money. A group-based credit approach is applied to use peer-pressure within a group to ensure the borrowers follow through and conduct their financial affairs with discipline, ensuring repayment and allowing the borrowers to develop good credit standing. The bank also accepts deposits, provides other services, and runs several development-oriented businesses including fabric, telephone and energy companies. The bank's credit policy to support under-served populations has led to the overwhelming majority (96%) of its borrowers being women.

Grameen Bank originated in 1976, in the work of Professor Muhammad Yunus, professor at University of Chittagong, who launched a research project to study how to design a credit delivery system to provide banking services to the rural poor. Based on his positive results, in October 1983 the Grameen Bank was authorized by national legislation as an independent bank. In 2006, the bank and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize. In 1998 the Bank's "Low-cost Housing Program" won a World Habitat Award. In 2011, the Bangladesh Government forced Muhammad Yunus to resign from Grameen Bank, saying that at age 72, he was years beyond the legal limit for the position.

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AcknowledgementAt the outset I would like to thank my mentor “Manisha Ma’am” for being very patient and helpful right from the choice till the completion of the project. I am eternally grateful to you for guiding me throughout the project.

I would like to thank my parents who allowed me to opt for the Grameen Bank Internship and helping me financially, emotionally and physically. Without their love and support this report would not have been possible.

I would also like to thank “Professor Muhammad Yunus” and the entire International Training Department and Grameen family for helping us learn from the scratch about the Nobel Peace prize winner organization. I am thankful to all the other interns especially Maneeha Chowdhary, Erin Tafur, Vinay Gupta and Rohit Nijhawan for making the entire internship experience more lively and friendly. I would extend my hearty thanks to all those associated with Grameen Bank.

I would also like to thank my college friends Parul for helping me to finish this project and share her resources to compile this report.

Prem Kumar Pankaj

B.com (Hons.), Section A

Kirorimal College, DU

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Contents1. Grameen Bank- Nobel Peace Prize Winner --------------------------------- 6

2. History ------------------------------------------------------------------------------- 8

3. What is Microcredit --------------------------------------------------------------- 10

4. Grameen Credit -------------------------------------------------------------------- 11

5. Sixteen Decisions ------------------------------------------------------------------ 14

6. Ten Indicators for Poverty Alleviation ---------------------------------------- 15

7. Traditional Banks Vs. Grameen Bank ----------------------------------------- 16

8. Women Members ----------------------------------------------------------------- 17

9. Organizational Structure --------------------------------------------------------- 18

10. Departments at Head Office --------------------------------------------------- 19

11. Grameen 1 and Grameen 2 ----------------------------------------------------- 20

12. Loan Products ---------------------------------------------------------------------- 21

13. Savings Products ------------------------------------------------------------------- 23

14. Credit Delivery System ----------------------------------------------------------- 25

15. Breaking the vicious cycle of poverty ----------------------------------------- 28

16. Method of Action ------------------------------------------------------------------ 30

17. Grameen Sister Companies ----------------------------------------------------- 31

18. Annual Report ---------------------------------------------------------------------- 35

19. Conclusion --------------------------------------------------------------------------- 37

20. Bibliography ------------------------------------------------------------------------- 38

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Grameen Bank(NOBEL PEACE PRIZE WINNER ORGANIZATION)

In August 1976, Dr. Muhammad Yunus, then Head of the Department of Economics at the University of Chittagong, started a project called Grameen Bank Project. In 1979, the project expanded into Tangail in corporation with Bangladesh Bank. In October 1983, it was established as an independent bank. Today, Grameen is operating all across the country and has been replicated in more than 100 countries of the world.

Grameen Bank is owned by the borrowers of the bank. The main goal is to make credit available to the rural poor, mostly women, in the struggle against poverty. In doing so, borrowers are given loans for income generating purposes, and housing. All loans are given without collateral and without legal instruments. Grameen Bank loans are paid on a weekly basis.

In 2002, Grameen Bank introduced its Struggled Member Program, especially designed to lend money to beggars to find a dignified livelihood. They are offered interest free loans. By the end of August 2012, cumulative members under this program reached 82,215. A total to Taka 2.44 million has so far been disbursed.

Grameen Bank introduces Higher Education Loan for its borrower’s children from 2000. By August 2012 there are 51,385 students have received higher education loan from Grameen Bank.

In an effort to encourage their members to educate their children, Grameen offers scholarships to children of its members. By August 2012 1, 55,281 students (both boys and girls) have received scholarships equal to US $ 3.42 million.

In August 2012 Grameen had 2567 branches, 282 area offices, 40 Zonal Offices, and 40 Zonal audit offices. Through 1,43,256 centers, spread over 81,383 villages, over US $ 12,552 million have been distributed to nearly 8.3 million borrowers, 96% of them are women. Savings balance of the borrowers stands at US $ 859.91 million.

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Housing loans total US $ 386.55 million have been distributed to 6, 92,865 members. The outstanding amount of loans stands at US $ 0.63 million with a repayment rate of 96.68%.

In 2006 Grameen Bank and its founder Professor Muhammad Yunus win the Nobel Peace Prize.

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History

Muhammad Yunus earned a doctorate in economics from Vanderbilt University in the United States. He was inspired during the Bangladesh famine of 1974 to make a small loan of US$27 to a group of 42 families as start-up money so that they could make items for sale, without the burdens of high interest under predatory lending. Yunus believed that making such loans available to a larger population could stimulate businesses and reduce the widespread rural poverty in Bangladesh.

Nobel Laureate Muhammad Yunus, the bank's founder Yunus developed the principles of the Grameen Bank (literally, "Bank of the Villages" in Bengali) from his research and experience. He began to expand microcredit as a research project together with the Rural Economics Project at Bangladesh's University of Chittagong to test his method for providing credit and banking services to the rural poor. In 1976, the village of Jobra and other villages near the University of Chittagong became the first areas eligible for service from Grameen Bank. Proving successful, the Bank project, with support from the central Bangladesh Bank, was extended in 1979 to the Tangail District (to the north of the capital, Dhaka). The bank's success continued and its services were extended to other districts of Bangladesh.

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By a Bangladeshi government ordinance on October 2, 1983, the project was authorized and established as an independent bank.[10] Bankers Ron Grzywinski and Mary Houghton of Shore Bank, a community development bank in Chicago, helped Yunus with the official incorporation of the bank under a grant from the Ford Foundation. The bank's repayment rate suffered from the economic disruption following the 1998 flood in Bangladesh, but it recovered in the subsequent years. By the beginning of 2005, the bank had loaned over USD 4.7 billion and by the end of 2008, USD 7.6 billion to the poor.

The Bank continues to expand across the nation and provide small loans to the rural poor. By 2006, Grameen Bank branches numbered over 2,100. Its success has inspired similar projects in more than 40 countries around the world, including a World Bank initiative to finance Grameen-type schemes.

The bank has gained its funding from different sources, and the main contributors have shifted over time. In the initial years, donor agencies used to provide the bulk of capital at low rates. By the mid-1990s, the bank started to get most of its funding from the central bank of Bangladesh. More recently, Grameen has started bond sales as a source of finance. The bonds are implicitly subsidized, as they are guaranteed by the Government of Bangladesh, and still they are sold above the bank rate. In 2013, Bangladesh parliament passed 'Grameen Bank Act' which replaces the Grameen Bank Ordinance, 1983, authorizing the government to make rules for any aspect of the running of the bank.

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What is Microcredit?

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The word "microcredit" did not exist before the seventies. Now it has become a buzz-word among the development practitioners. In the process, the word has been imputed to mean everything to everybody. No one now gets shocked if somebody uses the term "microcredit" to mean agricultural credit, or rural credit, or cooperative credit, or consumer credit, credit from the savings and loan associations, or from credit unions, or from money lenders. When someone claims microcredit has a thousand year history, or a hundred year history, nobody finds it as an exciting piece of historical information.

Broad classification of microcredit :

A) Traditional informal microcredit (such as, moneylender's credit, pawn shops, loans from friends and relatives, consumer credit in informal market, etc.)

B) Microcredit based on traditional informal groups (such as, tontin, su su, ROSCA, etc.)

C) Activity-based microcredit through conventional or specialised banks (such as, agricultural credit, livestock credit, fisheries credit, handloom credit, etc.)

D) Rural credit through specialised banks.

E) Cooperative microcredit (cooperative credit, credit union, savings and loan associations, savings banks, etc.)

F) Consumer microcredit.

G) Bank-NGO partnership based microcredit.

H) Grameen type microcredit or Grameen credit.

I) Other types of NGO microcredit.

J) Other types of non-NGO non-collateralized microcredit.

Grameen creditWhenever we use the word "microcredit" we actually have in mind Grameen type microcredit or Grameencredit. But if the person we are talking to understands it as some other category of microcredit my arguments will not make any sense to him. Let me list below the distinguishing features of Grameencredit. This is an exhaustive list of such features. Not every Grameen type programme has all these features present in the programme. Some programmes are strong in some of the features, while others are strong in some other features. But on the whole they display a general convergence to some basic features on the basis of which they introduce themselves as Grameen replication programmes or Grameen type programmes.

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Three C's of CreditCharacter: means how a person has handled past debt obligations: From credit history and personal background, honesty and reliability of the borrower to pay credit debts is determined.

Capacity: means how much debt a borrower can comfortably handle. Income streams are analysed and any legal obligations looked into, which could interfere in repayment.

Capital: means current available assets of the borrower, such as real estate, savings or investment that could be used to repay debt if income should be unavailable.

Sixteen Decisions The four principles of Grameen Bank-Discipline, Unity, Courage and hard

work-we shall follow and advance in all walks of our lives. We shall bring prosperity to our families. We shall not live in dilapidated houses. We shall repair houses and work

towards constructing new houses as soon as possible. We shall grow vegetables all the year round. We shall eat plenty of them

and sell the surplus.

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During the planting seasons, we shall plant as many seedlings as possible.

We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health.

We shall educate our children and ensure that they can earn enough to pay for their education.

We shall always keep our children and environment clean. We shall build and use pit latrines. We shall not take any dowry in our sons’ weddings; neither shall we give

any dowry in our daughter weddings. We shall keep the center free from the curse of dowry. We shall not practice child marriage.

We shall not inflict any injustice on anyone; neither shall we allow anyone to do so.

For higher income we shall collectively undertake bigger investments. We shall always be ready to help each other. If anyone is in difficulty, we

shall all help. If we come to know about any breach of discipline in any center, we

shall all go there and help restore discipline. We shall take part in all social activities collectively.

Ten Indicators of Poverty Alleviation for Members

1. The members and their family who are living with dignity in a tin roofed house or having a house with a worth of minimum Tk. 25000 only and the family members have the arrangement to sleep on cots or beds instead of floor.

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2. Use water from tube wells installed individually or jointly with others in the absence of tube well water ensures safe water by boiling or purifying it with alum, bleaching powder or water purifying tablet.

3. All the children of the members, who are at the age of six and above and are mentally and physically fit, go to school.

4. The members whose minimum weekly loan instalment is Taka 200 or more.

5. All the members use hygienic and sanitary latrine.6. The family members have sufficient clothing for daily use. Have the

winter clothes like Kantha, wrapper, sweater, quilt, blanket etc. to protect them from cold and have mosquito net to protect them from mosquito menace.

7. Have arrangements for growing vegetables or plantation of trees etc. in the homestead for earning additional income to improve the economic condition of the family and the same time enable them to pay their loan instalments from these incomes.

8. The members should have savings deposit in bank at least on average Tk. 5000 round the year.

9. Has the ability to feed the family members three square meals a day throughout the year i.e. no food crisis exists in the family.

10.All the family members are conscious about the health issues. Have the ability to take immediate actions for proper treatment including defraying of medical expenses in the event of illness of any member in the family.

Traditional Vs. Grameen Bank

Though Grameen Bank too follows certain principles of Traditional Banking System yet it is different from Traditional Banks in many ways which are mentioned as under:-

Basis of Difference Grameen Banking System Traditional Banking System

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Target GroupThe target group of Grameen bank is the poor and downtrodden people. It also includes the beggar members.

It only caters to the credit worthy people or middle class or rich people.

ApproachThe bank approaches people to become a part of it and join as members.

People approach bank to open their account with banks.

Ownership Grameen Bank is owned by its borrowers. Members have their stake in bank.

The bank is owned by shareholders who might not be its member.

Repayment The repayment rate is 97%which is much higher than other banks.

The repayment rate is comparatively very low.

Legal Documents

No legal documents are signed against any loan as they don’t want to drag their members to the court

Legal documents are a compulsion. In case of default the bank will seek help from court for final settlement.

SecurityNo collateral or security is needed against any loan.

Security or collateral is to be mortgaged against the loan.

Business Model

It is based on the concept of Micro-credit or social business.

It is based on the commercial model.

MotiveThe primary motive is social welfare and development.

The primary motive is earning profit.

Women MembersIn 1976 when the project of Bangladesh Bank started no one had thought of women being majority in this project. Earlier when this project started both men and women had and equal opportunity to obtain loan from the bank. Later on there was a paradigm shift and women members today are 97% of the total members while men account just for the remaining 3%. The reasons that led to such massive shift in context to Bangladesh were as follows:-

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Women are more conscious about savings, repayment etc. and are more sincere.

It was easier to attend Center meetings as men used to stay out of the village mostly for work.

Men were the earning members of the family while women served the households. So to manage their household in tough times in a better way needed more capital which the women could only understand.

It led to women empowerment, generated employment opportunities for them and helped them to manage family in a better way.

Women in Bangladesh don’t have say in the family, so Grameen bank helped in regaining their respect, dignity and made them a part of decision making in the family.

They were more conscious and contributed towards family as well as National Income.

Organizational Structure

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At Village Level:-

Zonal Office:-

40 Zonal Offices under the supervision of Zonal Manager. 9-10 people work in a Zonal Office. There are 40 Zonal Offices.

Area Office:-

It is under the supervision of Area Manager. 2nd man is the Program Officer. There are 268 Area Offices.

Branch Office:-

It is under the supervision of Branch Manager. There are 6-7 employees. The 2nd man is Accountant/Cashier (signatory). There is 1

messenger/peon. The Branch Manager handles the center meetings.

Head Office (1)

Zonal Office (40)

Area Office (268)

Branch Office (2567)

Center (1,42,990)

Groups (13,19,230)

Borrowers (84,78,014)

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Departments of Head Office

Board of Directors:-As per as the ordinance 75% of the stake is with Grameen Bank and the rest is with the Government. The composition of the Board of Directors is as follows:-

There are 13 Board of Directors out of which 9 are elected by the borrowers 3 are elected by the Government and 1 is Managing Director of Grameen Bank(Ex-officio without voting

power)

Training

Administration

Establishment

Service

Accounts

International Training and

Research

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Grameen 1 and Grameen 2

Grameen 1 is also known as the Classical system (1976-2000). Under this system there can only be 5 members in a group and a new member can join only when any one leaves the group. The number of members can’t exceed five at any point of time.

Under this system 5 additional members could be added when the group size turns 10. Then the new group could be divided into 2 groups having 7-8

Grameen 1

MembersChairman Secretary

Grameen 2General MembersAdditional MembersSecretaryChairman

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members each. There is 1 Group Chairman and secretary. The entire groups chairman elects the Center leader.

The Grameen System:-

60-70 Center form a Branch Office 8-10 Branches form an Area Office 6-8 Area Offices form Zonal Office 40 Zonal Offices form Head Office

Loan ProductsBasic Loan:-

As the name suggests basic loan is meant for the basic needs and necessities of life such as food, clothing, shelter, health and education. The repayment period of Basic loan is 52 weeks or 45 weeks. Instalments are payable on declining method but at a flat rate of 10%. The rate of Interest chargeable on such loan is 20%.

Instalment = { [(First bal. +Last bal.)/2] (No. of days) (Interest Rate) }*100 Days 365 Days

Flexible Loan:-

It is also known as Contract Loan. The rate of Interest applicable is 20%. If any member is unable to pay his/her instalment on time due to some unforeseen circumstances (death, illness) for the past 10 weeks, then he/she can contact the bank to pay a minimum instalment of Taka 50 and when the member regains his solvency he can pay it back within 3 years the overdue balance to enter back Basic loan if he/she fails to do so it turns into a bad debt. This came to existence when Bangladesh was severely hit by Flood.

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House Loan:-

The rate of interest is 8% which is chargeable on declining method. It is available to both employees and members. It is basically meant for the poor. Grameen Bank also provides apparatus required for building house. The required raw material is chosen by the husband/member along with the Branch Manager. Now Grameen Bank stopped it, instead basic loan is used in place of it.

Beggar Loan:-

Beggar Loan started through an informal program. There is no liability for beggar members to attend the center meetings. Under this scheme bank provides loan to such members to purchase daily consumables and sell it door-to-door. Initially under this scheme 500-1000 Taka is given initially. No interest is to be paid. Along with this umbrella and mosquito nets are provided.

New Entrepreneur Loan:-

The rate of interest under this loan is 20%. It is given to the kids of the members to initiate a business when the child gains higher education but fails to get a job.

Provident Fund Loan:-

The rate of interest under this scheme is 9.5% per annum and is given to the employees of Grameen Bank. This loan is given against the Provident Fund balance.

Motor Cycle and Household loan:-

This loan is kind of working capital that is required by businesses. As the name suggests Household loan is given to carry out the day-to-day activities of the household. Motor cycle loan is given to purchase motor cycle. The interest rate for both the loans is 5%.

House Building Loan:-

This loan is different from housing loan it is meant for dwellers in sub-urban areas and cities; not villages. The rate of interest is 8% per annum on a declining basis.

Education Loan:-

It is available to the children of borrowers. It caters to B.Tech (Engineering), Medical students, University student etc. It is meant for higher education

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purpose only. In order to avail this loan facility the child should have blood relation with parents (excluding adopted, step children or children of relatives). Taka 1, 00,000 loan is given for 4 years course. The entire loan schedule is divided into 4 years and each year into 4 quarters (3 months). So each month close to Taka 6,000 is disbursed and signature of both member and student is taken so that loan money is not misused and 1 year grace period is given for repayment where the student searches for job. Until he finds a job no interest is chargeable but after the end of the grace period interest starts getting due.

Micro-enterprise Loan:-It is meant for good and credit worthy customers and those who have potential to expand their business. It can be given only after the member has taken Basic and 2nd loan. The repayment period is negotiable. Interest applicable is 20%.

Savings ProductsPersonal Savings:-

It is open for both members and non-members of bank. For this they must open a savings account with bank. They are supposed to deposit an equal amount every week and can increase the deposit money but the increased amount must be continued every week from thereon.

Grameen Pension Scheme (GPS):-

It is meant for borrowers/members and Grameen employees. It is a monthly deposit scheme. It Involves 2 schemes-

5 Years 10% Interest :- Withdrawl can be at any time. If amount is withdrawn before maturity then-i) 0-1 Year- No Interestii) 1-3 Years- 8% Interestiii) 3-5 Years- 10% Interest

10 Years 12% Interest :- Withdrawl can’t be anytime. If the money is withdrawn before maturity for 1st 5 years same schedule is followed but betwwen 5-10 Years 12% Interest will be given.

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If an account is opened suppose with 500 Tk. then monthly deposit should be 500 Tk. only. 10 years 12% interest is a better scheme than the former.

Fixed Deposit:-

Minimum amount for FD account is 100 Taka. Under this scheme the Interest is categorized as follows-

1 Year- 8.75% Interest 2 Years- 9.25% Interest 3 Years- 9.50% Interest

In case if they want to withdraw money, interest will be paid as follows-

0-1 Year- 0% Interest 1-2 Years- 8.75% Interest 2-3 Years- 9.25% Interest

Double in 7 Years (Fixed Deposit):-

It is a contract. It is a special type of Fixed Deposit and is a very popular scheme. In case if the amount is withdrawn before maturity the Interest is paid according to the chart mentioned behind the receipt. Minimum deposit under this scheme is 1000 Taka and there is no limit for maximum deposit. Under this scheme is suppose 100 Taka is deposited today, after 7 years the depositor will get 200 Taka. Effective rate of interest is 10.4% Interest.

Monthly Profit Scheme:-

It is open to all and is a kind of fixed deposit. Profit is given back every month. Rate of profit or Interest is 8.5% per month. Suppose 1,00,000 Taka is deposited then monthly interest will be 850 Taka which will be transferred to savings account and further 8.5% Interest will be given on 850 Taka under Personal Savings Scheme. A nominee could be chosen and the amount of interest could be transferred directly to his/her savings account.

Loan Insurance Savings:-

It is only for borrowers and employees. It is a special type of savings. In this scheme the deposit amount should equal 3% of outstanding loan. In this scheme only principal amount is paid back without any interest after the loan amount is paid. Total outstanding loan is kept into consideration. If the

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outstanding amount is less then further no deposits are to be made but in case the amount is more; then deposit is to be made on the increased amount.

Additional 3% can be deposited for their husbands and in case of death 100% of the loan will be waived off. Earlier it was not that successful but now it has gained popularity. Nearly 75% of the husbands are covered under this scheme. 12% of the deposited amount goes to a fund for meeting such contingencies. 3% deposited can be adjusted against the loan amount from this savings account. The money is given back in case members leave Grameen Bank. This is a kind of savings made against the loan, a sort of collateral.

Credit Delivery System

Grameen Bank Credit Delivery means taking credit to the very poor in their villages by means of the essential elements of the Grameen credit delivery system.

Grameen Bank credit delivery system has the following features:1 There is an exclusive focus on the poorest of the poor.

Exclusivity is ensured by:i) establishing clearly the eligibility criteria for selection of targeted clientele and

adopting practical measures to screen out those who do not meet themii) in delivering credit, priority has been increasingly assigned to womeniii) the delivery system is geared to meet the diverse socio-economic development

needs of the poor2 Borrowers are organized into small homogeneous groups.

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Such characteristics facilitate group solidarity as well as participatory interaction. Organizing the primary groups of five members and federating them into centers has been the foundation of Grameen Bank's system. The emphasis from the very outset is to organizationally strengthen the Grameen clientele, so that they can acquire the capacity for planning and implementing micro level development decisions. The Centers are functionally linked to the Grameen Bank, whose field workers have to attend Center meetings every week.

3 Special loan conditionality which are particularly suitable for the poor.These include:i) Very small loans given without any collateralii) Loans repayable in weekly instalments spread over a yeariii) Eligibility for a subsequent loan depends upon repayment of first loaniv) Individual, self-chosen, quick income generating activities which employ the

skills that borrowers already possesv) Close supervision of credit by the group as well as the bank staffvi) Stress on credit discipline and collective borrower responsibility or peer

pressurevii) Special safeguards through compulsory and voluntary savings to minimize the

risks that the poor confrontviii) Transparency in all bank transactions most of which take place at center

meetings.

4 Simultaneous undertaking of a social development agenda addressing basic needs of the clientele.This is reflected in the "sixteen decisions" adopted by Grameen borrowers. This helps to:i) Raise the social and political consciousness of the newly organized groupsii) Focus increasingly on women from the poorest households, whose urge for

survival has a far greater bearing on the development of the familyiii) Encourage their monitoring of social and physical infrastructure projects -

housing, sanitation, drinking water, education, family planning, etc.5 Design and development of organization and management systems capable of

delivering program resources to targeted clientele.The system has evolved gradually through a structured learning process that involves trials, errors and continuous adjustments. A major requirement to operationalize the system is the special training needed for development of a highly motivated staff, so that the decision making and operational authority is gradually decentralized and administrative functions are delegated at the zonal levels downwards.

6 Expansion of loan portfolio to meet diverse development needs of the poor.As the general credit program gathers momentum and the borrowers become

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familiar with credit discipline, other loan program are introduced to meet growing social and economic development needs of the clientele. Besides housing, such program include:i) credit for building sanitary latrinesii) credit for installation of tube wells that supply drinking water and irrigation for

kitchen gardensiii) credit for seasonal cultivation to buy agricultural inputsiv) loan for leasing equipment / machinery, i.e., cell phones purchased by

Grameen Bank membersv) Finance projects undertaken by the entire family of a seasoned borrower.

The underlying premise of Grameen is that, in order to emerge from poverty and remove themselves from the clutches of usurers and middlemen, landless peasants need access to credit, without which they cannot be expected to launch their own enterprises, however small these may be. In defiance of the traditional rural banking postulate whereby "no collateral (in this case, land) means no credit", the Grameen Bank experiment set out to prove - successfully - that lending to the poor is not an impossible proposition; on the contrary, it gives landless peasants the opportunity to purchase their own tools, equipment, or other necessary means of production and embark on income-generating ventures which will allow them escape from the vicious cycle of "low income, low savings, low investment, low income". In other words, the banker's confidence rests upon the will and capacity of the borrowers to succeed in their undertakings.

The mode of operation of Grameen Bank is as follows. A bank branch is set up with a branch manager and a number of center managers and covers an area of about 15 to 22 villages. The manager and the workers start by visiting villages to familiarize themselves with the local milieu in which they will be operating and identify the prospective clientele, as well as explain the purpose, the functions, and the mode of operation of the bank to the local population. Groups of five prospective borrowers are formed; in the first stage, only two of them are eligible for, and receive, a loan. The group is observed for a month to see if the members are conforming to the rules of the bank. Only if the first two borrowers begin to repay the principal plus interest over a period of six weeks, do the other members of the group become eligible themselves for a loan. Because of these restrictions, there is substantial group pressure to keep individual records clear. In this sense, the collective responsibility of the group serves as the collateral on the loan.

Loans are small, but sufficient to finance the micro-enterprises undertaken by borrowers: rice-husking, machine repairing, purchase of rickshaws, buying of milk cows, goats, cloth, pottery etc. The interest rate on all loans is 16 percent. The repayment rate on loans is currently - 95 percent - due to group pressure and self-

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interest, as well as the motivation of borrowers.

Although mobilization of savings is also being pursued alongside the lending activities of the Grameen Bank, most of the latter's loanable funds are increasingly obtained on commercial terms from the central bank, other financial institutions, the money market, and from bilateral and multilateral aid organizations.

Breaking the vicious cycle of poverty through

microcreditThe Grameen Bank is based on the voluntary formation of small groups of five people to provide mutual, morally binding group guarantees in lieu of the collateral required by conventional banks. At first only two members of a group are allowed to apply for a loan. Depending on their performance in repayment the next two borrowers can then apply and, subsequently, the fifth member as well.

The assumption is that if individual borrowers are given access to credit, they will be able to identify and engage in viable income-generating activities - simple processing such as paddy husking, lime-making, manufacturing such as pottery, weaving, and garment sewing, storage and marketing and transport services. Women were initially given equal access to the schemes, and proved not only reliable borrowers but astute entrepreneurs. As a result, they have raised their status, lessened their dependency on their husbands and improved their homes

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and the nutritional standards of their children. Today over 90 percent of borrowers are women.

Intensive discipline, supervision, and servicing characterize the operations of the Grameen Bank, which are carried out by "Bicycle bankers" in branch units with considerable delegated authority. The rigorous selection of borrowers and their projects by these bank workers, the powerful peer pressure exerted on these individuals by the groups, and the repayment scheme based on 50 weekly instalments, contribute to operational viability to the rural banking system designed for the poor. Savings have also been encouraged. Under the scheme, there is provision for 5 percent of loans to be credited to a group find and Tk. 5 is credited every week to the fund.

The success of this approach shows that a number of objections to lending to the poor can be overcome if careful supervision and management are provided. For example, it had earlier been thought that the poor would not be able to find remunerative occupations. In fact, Grameen borrowers have successfully done so. It was thought that the poor would not be able to repay; in fact, repayment rates reached 97 percent. It was thought that poor rural women in particular were not bankable; in fact, they accounted for 94 percent of borrowers in early 1992. It was also thought that the poor cannot save; in fact, group savings have proven as successful as group lending. It was thought that rural power structures would make sure that such a bank failed; but the Grameen Bank has been able to expand rapidly. Indeed, from fewer than 15,000 borrowers in 1980, the membership had grown to nearly 100,000 by mid-1984. By the end of 1998, the number of branches in operation was 1128, with 2.34 million members (2.24 million of them women) in 38,957 villages. There are 66,581 centers of groups, of which 33,126 are women. Group savings have reached 7,853 million taka (approximately USD 162 million), out of which 7300 million Taka (approximately US$ 152 million) are saved by women.

It is estimated that the average household income of Grameen Bank members is about 50 percent higher than the target group in the control village, and 25 percent higher than the target group non-members in Grameen Bank villages. The landless have benefited most, followed by marginal landowners. This has resulted in a sharp reduction in the number of Grameen Bank members living below the poverty line, 20 percent compared to 56 percent for comparable non-Grameen Bank members. There has also been a shift from agricultural wage labour (considered to be socially inferior) to self-employment in petty trading. Such a shift in occupational patterns has an indirect positive effect on the employment and wages of other agricultural waged labourers. What started as an innovative local initiative, "a small bubble of hope", has thus grown to the point where it has made an impact on poverty alleviation at the national level ".

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Method of ActionThe Grameen Bank's Method of action can be illustrated by the following principles:

Start with the problem rather than the solution: a credit system must be based on a survey of the social background rather than on a pre-established banking technique.

Adopt a progressive attitude: development is a long-term process which depends on the aspirations and commitment of the economic operators.

Make sure that the credit system serves the poor, and not vice-versa: credit officers visit the villages, enabling them to get to know the borrowers.

Establish priorities for action vis-a-vis to the target population: serve the most poverty-stricken people needing investment resources, who have no access to credit.

At the beginning, restrict credit to income-generating production operations, freely selected by the borrower. Make it possible for the borrower to be able to repay the loan.

Lean on solidarity groups: small informal groups consisting of co-opted

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members coming from the same background and trusting each other. Associate savings with credit without it being necessarily a

prerequisite. Combine close monitoring of borrowers with procedures which are

simple and standardised as possible. Do everything possible to ensure the system's financial balance. Invest in human resources: training leaders will provide them with real

development ethics based on rigour, creativity, understanding and respect for the rural environment.

Grameen Sister Companies

Grameen Communications

Grameen Communications is one of the IT-based solution providers in Bangladesh, concentrated on Micro Finance Software development, Implementation, Hardware Support, Training and Project Support relating to Rural Development. GC has the broad mission to promote the establishment of an accessible and sustainable information and communication infrastructure all over Bangladesh for research collaboration, information exchange, information sharing as well as communications.

As a result of the success of Grameen Bank in reaching and serving the poor with credit, many people and organizations began to think in Grameen's way, and wanted to learn more about Grameen and follow Grameen's principles in their own sphere of work. It is primarily to meet this demand that the Grameen Trust (GT) came into being in 1989

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Grameen Fund

Grameen Fund was incorporated on January 17, 1994 as a "not-for-profit" company and started operations on February 1, 1994. Its emphasis is on providing finance to ventures that are risky, technology - oriented and otherwise deprived of financing from existing formal lending institutions.

Grameen Telecom

Grameen Telecom is a company dedicated to bringing the information revolution to the rural people of Bangladesh. Grameen Telecom is planning, over the next 4 years, to provide GSM 900/1100 cellular mobile phone service to 100 million rural inhabitants in 68,000 villages of Bangladesh by (1) financing 60,000 members of Grameen Bank to provide village pay phone service and (2) providing direct phones to potential subscribers.

Grameen Cybernet Ltd.

Grameen Cybernet Ltd. has been Bangladesh's leader in Internet service provision since it commenced operation in July 1996. Its Chief Executive has had an extensive career in education and information technology in the US and is assisted by a team of bright, young executives.

Grameen Shakti/Energy

Grameen Shakti (GS) is a not-for-profit rural power company whose purpose is to supply renewable energy to villages in Bangladesh. GS expects not only to supply renewable energy services, but also to create employment and income-generation opportunities in rural Bangladesh.

Grameen Phone

In the fast-paced world of telecommunications, vibrant and dynamic Corporate Governance practices are an essential ingredient to success. Grameen phone believes in the continued improvement of corporate

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governance. This in turn has led the Company to commit considerable resources and implement internationally accepted Corporate Standards in its day-to-day operations.

Grameen Shikkha/Education

Grameen Shikkha is a company in the family of Grameen companies. Established in 1997 its main objectives are to promote mass education in rural areas, provide financial support in the form of loans and grants for the purpose of education, use IT for alleviation of illiteracy and development of education, promote new technologies and innovate ideas and methods for development of education etc. Grameen Shikkha has been conducting Life Oriented Education Program, Pre-school/Child Development Program, Early Childhood Development Program and Arsenic Mitigation Program in various districts of Bangladesh.

Grameen Knitwear Limited

Grameen Knitwear Limited: The company is a 100% export oriented composite knitwear factory, located in the Export Processing Zone in Savar in the vicinity of Dhaka, the capital of Bangladesh. It has knitting, dyeing, finishing and garments production facilities. Most of the machinery and equipment have been sourced from Europe. The factory is capable to produce very high quality of different knit fabrics and garments of children, men and women. The fabrics and garments are fabric and yarn dyed 100% cotton, TC, CVC, and Polyester with lycra attachment etc. of various counts. The countries where the goods are currently exported are mostly Europe. The goods are exported against confirmed irrevocable letter of credit.

Grameen Solutions

Grameen Solutions, a flagship technology company within Grameen family of organizations. Founded by Dr. Muhammad Yunus, recipient of 2006 Nobel Peace Prize, Grameen Solutions offers business services, management consulting, software development, business process and service outsourcing. Grameen Solutions offers unparalleled total value through creative solutions that meet the diverse and dynamic needs of our global and local client base.

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With Grameen Solutions, consider it solved!

Grameen Solutions has been predominant in serving the telecommunications industry through the development of a diverse range of products. In keeping with the current global trend of diversified business, Grameen Solutions has expanded its portfolio of product and services to meet the needs of technology industry, educational institutions, government sector, banking and finance, health-care and manufacturing firms. Thus, expanding possibilities, increasing technology inclusion, forging successful partnerships and encouraging great customer feedback.

Grameen Byabosa Bikash

Grameen Byabosa Bikash (GBB) is one of the sister organizations in the Grameen family of enterprises. The English meaning of this name is “Grameen Business Promotion and Services”. GBB is a social business and not-for-profit organization registered under the Companies Act – 1994 of Peoples Republic of Bangladesh Government. It started operation in 2001 with its registered office located at the Grameen Bank Complex at Mirpur area of Dhaka city.

GBB has a board consisting of 8 members. The Board is headed by Nobel laureate Professor Muhammad Yunus. The other Board members are also renowned in their respective field. The Board sits at least every four months to assess the progress of the organization.

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Grameen Bank Monthly Update in US$: October, 2013HEAD OFFICE, MIRPUR-2 DHAKA-1216

Sl. No. Particulars In million US $1.0 Cumulative Amount Disbursed Since Inception 14,354.292.0 Cumulative Amount Repaid Since Inception 12,994.673.0 Amount Disbursed this month 118.184.0 Amount Repaid this month 125.195.0 Outstanding Loans

5.1 Basic Loan 933.585.2 Flexible Loan 91.105.3 Housing Loan 0.455.4 Education Loan 36.755.5 Other Loans 4.125.6 Total : 1,066.01

6.0 Rate of Recovery 97.267.0 Total Outstanding Borrowers Missing 5 to 9 Instalments

7.1 Basic Loan 6.777.2 Flexible Loan 16.157.3 Total : 22.93

8.0 Overdue Loan8.1 Basic Loan 12.8358.2 Flexible Loan 8.8328.3 Housing Loan 0.0088.4 Other Loan 0.0008.5 Total : 21.675

9.0 Microenterprise Loan (Cumulative)9.1 Number of Microenterprise Loans 5,219,6789.2 Amount Disbursed 2,332.479.3 Amount Repaid 2,050.34

10.0 Balance Of Deposits

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10.1 Members’ Deposits 1,069.0210.2 Non-members’ Deposits 664.1510.3 Total : 1,733.17

11.0 Deposits To Outstanding11.1 Deposits as Percentage of Outstanding Loans 16311.2 Deposits and Own Resources as Percentage Of O/S Loan 17911.3 No. Of Branches with more in Deposits than O/S Loan 1,997

(a) On the last day of each month, 50% provision is made against the outstanding amounts of flexible loans with age of less than 2 years, and 100% provision is made against the o/s amounts of flexible loans with age of 2 years and more. The portions of flexible loans which complete the third year are written off exactly on the date following their completion.

(b) This figure is not exactly equal to the difference between items 1 and 2 because of difference between conversion rates.(c) Amount repaid as a percentage of amount due.(d) If a borrower misses 10 consecutive instalments, the entire outstanding loan is treated as an overdue loan(e) On the last day of each month, 100% provision is made against all overdue loans. Entire amount of all overdue loans is written

off one year after they become overdue.(f) In case of one-year loan, if the borrower fails to repay half the loan amount, with interest, within 26 weeks, entire unpaid

amount becomes overdue. In case of loans with longer duration, if the borrower fails to repay the total principal amount and interest scheduled to be repaid within each segment of 26 weeks, entire unpaid amount falls overdue.NOTE: Current exchange rate : 1 US$ = Taka 77.75.

Sl. No. Particulars In Million US$12.0 Beggar Members

12.1 Number of beggar Members 80,35512.2 Amount Disbursed (Cumulative) 2.5112.3 Amount Repaid (Cumulative) 2.0512.4 Amount of savings (Balance) 0.11

13.0 Cumulative Number of village phones 1,271,58314.0 Cumulative Number Of Houses built with Housing Loan 694,91015.0 Life Insurance Fund (Cumulative)

15.1 Number of Death among all borrowers 156,27315.2 Amount paid out of life Insurance Fund 5.09

16.0 Loan Insurance16.1 Balance in Loan Insurance Savings 103.8516.2 Number of Deaths among persons Insured (Cumulative) 290,43916.3 Amount of outstanding principal and Interest of the Deceased borrowers paid out of Insurance Fund (Cumulative)

40.48

17.0 Higher Education Loan (Cumulative)17.1 Number of female students 12,24217.2 Number of Male students 40,28017.3 Total : 52,52217.4 Amount Disbursed (Female) 12.1817.5 Amount Disbursed (Male) 32.9317.6 Total : 45.11

18.0 Scholarship (Cumulative)18.1 Scholarship Recipients (Female) 106,83218.2 Scholarship Recipient (Male) 75,18818.3 Total : 182,02018.4 Scholarship Amount (Female) 2.3918.5 Scholarship Amount (Male) 1.7118.6 Total : 4.09

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19.0 Number of Members19.1 Female 8,156,19119.2 Male 321,83219.3 Total : 8,478,014

20.0 Number of Groups 1,319,21321.0 Number of Centres 142,99022.0 Number of Villages 81,38823.0 Number of Branches 2,56724.0 Number of Branches with Computerised Accounting and MIS 2,567

(g) Number of members includes both beggar members and Higher education Loan recipients mentioned in item number 12.1 and 17.3 respectively.

CriticismSome analysts have suggested that microcredit can bring communities into debt from which they cannot escape. Researchers have noted instances when microloans from the Grameen Bank were linked to exploitation and pressures on poor families to sell their belongings, leading in extreme cases to humiliation and ultimately suicides.

The Mises Institute's Jeffrey Tucker suggests that microcredit banks depend on subsidies in order to operate, thus acting as another example of welfare. Yunus believes that he is working against the subsidized economy, giving borrowers the opportunity to create businesses. Some of Tucker's criticism is based on his interpretation of Grameen's "16 decisions," seen as indoctrination, without considering what they mean in the context of poor, illiterate peasants.

Maulana Ibrahim, an imam in Bangladesh, spoke out against the Grameen Bank in 1993 for fostering "un-Islamic ways." He alleged that the lenders' pledge required women to say they would not obey their husbands and would not live in poverty anymore.

The Norwegian documentary, Caught in Micro debt, said that Grameen evaded taxes. The Spanish documentary, Microcredit, also suggested this. The accusation is based on the unauthorized transfer of approximately US$100 million, donated by The Norwegian Agency for Development Cooperation (NORAD), from one Grameen entity to another in 1996, before the expiry of the Grameen Bank's tax exemption.

Muhammad Yunus denies that this is tax evasion:

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"There is no question of tax evasion here. The Government has provided organizations with opportunities; we have made use of these opportunities with aim of benefitting our shareholders who are the rural poor women of Bangladesh."

David Roodman and Jonathan Morduch question the statistical validity of studies of microcredit's effects on poverty, noting the complexity of the situations involved. Yoolim Lee and Ruth David discuss how microfinance and the Grameen model in South India have in recent years been distorted by venture capitalism and profit-makers. In some cases, poor rural families have suffered debt spirals, harassment by microfinance debt collectors, and in some cases suicide.

Bibliography http://www.grameen-info.org/ http://en.wikipedia.org/wiki/Grameen_Bank Publications from International Training Department Annual Reports “Banker To The Poor- Creating a world without Poverty” “Building Social Business”- Muhammad Yunus with Karl Weber’